Foreign Direct Investments Influence on Romanian Economy

Theoretical aspects on sustainability were developed especially after '80's, when debt rate as percent in GDP increases dramatically in developed countries. One question difficult to answer is that foreign direct investments (FDI) must be included in current account deficit sustainability level. FDI is more stable than financial flows due the fact that foreign investors have long term contracts. In transition countries, dynamics of fiscal processes affected consumption, internal and foreign investments and growth. In this context, we study the relationship between foreign direct investment and economic growth in transition countries, especially in Romania. To analyze the effects of FDI on Romanian growth we use a neoclassical model with Cobb-Douglas production functions, followed by a short term GDP evolution prognosis. Our basic results show that Romanian economic growth was positively influenced by fiscal policy, FDI and also by adhesion to EU.